Tuesday, October 14, 2008

New paper: “Social Security: Who Wants Private Accounts?”

Although the polling data isn't current and support for accounts has dropped a lot, the analysis in this new paper by Michael S. Finke

of Texas Tech and Swarn Chatterjee of the University of Georgia is very interesting. Using the raw data from a 2004 survey on Social Security personal accounts, they do a regression analysis on the factors that best predict support or opposition to accounts. Here's the synopsis:

Preference for partial privatization of social security is explored using a 2004 sample of 7,565 young baby boomers. Two-thirds of the sample would choose partial privatization. While a greater proportion of higher-income, wealthier, and more educated respondents preferred private accounts, multivariate analysis reveals that intelligence has a stronger effect than socio-economic variables. An average of 43% would be invested in equities, but a surprising 35% would be invested in government bonds. Men and those with higher intelligence are more likely to prefer equities, while women prefer corporate bonds and the less educated, blacks, and respondents with children preferred government bonds.

Click here to read the whole paper.


Anonymous said...

To clarify, they don't analyze who supports the introduction of accounts, but rather who would choose to participate in accounts if that choice were available.

Some people (typically rich Democrats) might oppose the accounts in principle but choose to participate if they were implemented, while others (such as poor Republicans) might support the policy but still choose to stay in a pure DB system.

(The question the paper uses from the NSLY is "Suppose that you have to make the following choice: First, you could stay in the current Social Security program, where the government promises you a benefit based on your earnings. Or second, you could put part of your Social Security taxes (say, 20 percent) into a personal retirement account where you decide how to invest that money. If you take this second choice, the Social Security benefit that you are currently promised will be reduced by 20 percent because you will be putting that part of your Social Security taxes into your personal retirement account. But at retirement, you will also get whatever money is in your personal account, which will depend on the investments you make. Which would you choose--to stay in the current Social Security program or to replace part of your Social Security with a personal retirement account?")

Andrew G. Biggs said...

That's correct: they're looking at an individual decision -- would I want a personal account? If so, would I invest it in stocks or bonds? -- not a policy decision, namely, whether people should be given the option of an account. The two are separate, although I suspect it's possible to infer across categories (e.g., if respondents strongly favored or opposed accounts for themselves, it's likely they would do so on policy grounds as well).